EU offers €3B subsidy to boost electric vehicle industry

To compete with China and revive the electric vehicle (EV) industry, the European Union (EU) is providing battery manufacturers with €3 billion in subsidies.

The European Commission has proposed financial support meant to increase the competitiveness of the electric vehicle industry.

The availability of the funding, which come from the EU's Innovation Fund, is subject to the sustainability and efficiency of the batteries and will last until 2026.

The UK has been pressed by the EU to promise not to allow another extension in three years. This is a part of a larger agreement to postpone tariffs on electric vehicle trade between the EU and the UK starting on January 1.

An EU official said: “We want to preserve that market access, make sure that we have a very strong position globally and also in our largest export market as China is indeed increasing its market share and it is doing so increasingly through unfair practices.” 

The Vice-President of the Commission, Maroš Šefčovič, stressed the significance of giving European sustainable battery manufacturers substantial financial support as well as legal clarity. 

The European Union wants to make the whole battery and electric car value chain stronger. The money would help European battery manufacturers create sustainable solutions and provide legal certainty on regulations.

A lack of batteries and chemicals is one of the issues facing the EU, along with an anti-subsidy inquiry into Chinese electric vehicle manufacturers. According to the EU official, in order to gain market access and keep a strong position internationally, batteries must be produced in Europe or the United Kingdom.

"The problem we face right now is that we don’t have batteries or we don’t have enough chemicals,” the official said, adding, “We want these batteries to be built in Europe or in the UK. But we’re not there yet.”

Northvolt, a Swedish battery manufacturer, expressed excitement about advancing the race to develop more environmentally friendly and circular batteries in response to the announcement of the funding.

“If used correctly, this mechanism could further fuel the race towards creating more sustainable and circular batteries, giving Europe a competitive edge while also moving towards realising the goals of the Paris agreement.”

10% EV tariffs were imposed on the UK on January 1st under the terms of the post-Brexit Trade and Cooperation Agreement. Complicated origin regulations would have affected batteries, which make up 30–40% of an automobile's value, by requiring 45% of parts to be manufactured in the UK or EU to avoid tariffs.

The EU suggested the battery subsidy in order to achieve the tariff delay. Fearing a precedent, France demanded the funding in exchange for its consent. Currently, a qualified majority of the 27 member states must approve the proposal.

The announcement of the subsidies is in line with the EU's objectives of cutting carbon emissions, facilitating the switch to sustainable energy, and growing the electric vehicle (EV) market.

The action also addresses economic concerns because tariffs may have forced European automakers to incur huge expenditures, which would have resulted in losses and output reductions.

By taking a proactive stance, the EU hopes to solidify its place in the international EV market, giving it a long-term competitive edge and sustainability.